The original version of the Servicemembers Civil Relief Act (“SCRA“) was enacted in 1940. Since then, Congress has amended it a number of times. But the federal law is still rife with ambiguity. The language is sometimes broad and open to several interpretations which makes sophisticated users set up processes that make SCRA Compliance essential.
What’s alarming to lending institutions — and understandably so — is the degree to which they are held liable for compliance with this law and the penalties they may have to pay absent real, concrete guidance from the government.
The government created the Servicemembers Civil Relief Act to protect military personnel serving our country. Its intention is to relieve them of the worry of whether bills are being paid at home, so they can concentrate on their jobs.
Times — And the SCRA — Change
But over the years, life, finances, and how we manage them has changed significantly. When Congress first enacted the law, there was no internet, no Freddie Mac and no student loans. The bills we pay and the manner in which we pay them has evolved since then.
Consequently, it has become common for lending institutions to misinterpret the SCRA, and the Department of Justice is not particularly forgiving. The DOJ has filed numerous lawsuits over the past few years against lending institutions for noncompliance with the SCRA. As you may guess, any pleas of ignorance of the law have fallen on deaf ears.
Consent Orders in SCRA Cases
Studying the intricacies of the latest version of the law will not necessarily provide answers to your questions. What’s critical is that you keep up on the consent orders. These contain the keys that unlock the secrets of how lenders should do business with servicemembers. One slip in the process of eviction, foreclosure, repossession or interest rate adjustment could find you paying out in the thousands or even millions. SCRA Compliance should never take the back seat.
Most lending institutions are aware that they should check a client’s military status before seeking any type of judgment or other enforcement action against them. But even this SCRA compliance isn’t always enough. Especially if you have incorrect, incomplete or missing information such as name or Social Security number, you could get erroneous results. In fact, the consent orders promote the idea that lenders and services be proactive about scrubbing data to identify servicemembers and offer them the protections to which they may be entitled.
Using a service like the Servicemembers Civil Relief Act Centralized Verification Service can take some of the worry out of staying in compliance with the SCRA. We can provide you accurate, guaranteed results, usually within 24 hours. And you don’t even need a Social Security number.
Once Isn’t Enough – an SCRA Compliance Essential
But one check is often insufficient. Experts advising lenders in keeping in compliance with the SCRA recommend several checks along the process.
Lenders know only too well how long paperwork and processes take. If your client joins the military in the meantime and you unknowingly proceed with your case, you may end up paying a steep price. You should make multiple checks at intervals throughout the process.
The best insurance against being out of compliance with the SCRA is to set up a department to address this issue. This does not have to be their sole focus. However, you should task the group with making checks, tracking progress and cross-checking client accounts. If, for instance, a servicemember requests a lower interest rate on a credit card because they have been deployed, your department should automatically check to see if this servicemember has other accounts with your organization, such as a mortgage or auto loan, and extend these protections automatically.
The best way to stay in compliance with the SCRA is to use a trusted service to make checks frequently.